Check my answer on compounding interest please?
I asked this question earlier, and i think i sovled it. could someone check it for me please? (sorry i cant do the symbols things)
Suppose you hold a bond that matures 3 months from today. Upon maturity, the bond pays you $100. The price of the bond is $96.50. What is the nominal interest rate associated with the bond, expressed as a compounded annual rate?
1- find out what the interest rate it (i used the Pert method)
r=.012 more or less
2- using the compounding formula to get the annual rate:
1(1+.012)^12=1.154 more or less...
so the answer would be 15.4% ..? odes this sound right?